Malaysian’s voted on 5 May in what was rightly expected to be the country’s tightest general election yet, with some risk that the ruling coalition Barisan Nasional (BN) would be unseated. However, BN, which has been in power since independence, emerged victorious again, gaining 133 seats in Parliament versus 89 won by the opposition coalition, Pakatan Rakyat.

BN’s share of seats is not only lower than its stated two-thirds target, it is lower than after the 2008 election. However, this outcome is considerably better than most pundits expected. Indeed, it is a stable majority such that the party should retain a firm grip on power through to 2017/18. In addition, the record 80% turnout validates the result…

We think the macroeconomic implications of this are positive over both the short and long term. Najib has made it clear fiscal reform will remain a priority, aiming to bring the deficit-to-GDP ratio down to 3% and public debt- to-GDP to 50% by 2015. This will be achieved through both expenditure and revenue reforms, with subsidy cuts (particularly to fuel) possible as early as this year and a goods and services tax (GST) by next…

Our calculations also assume that real GDP growth would stay robust at 5.8%. The Economic Transformation Program that focuses on 12 key economic areas, is likely to remain intact. This means that domestic demand, and in particular investment, should continue to propel the economy. Exports will also kick in as an additional engine of growth from 2Q13 onwards.

And it should even be good news for investors in Malaysia, according to Barclays:

Price action since the election result has been unequivocally positive for the MYR. So far, we think this reflects onshore activity, with investors unwinding USD longs that were entered ahead of yesterday’s vote. With polls ahead of the vote unusually polarised, a convincing mandate for the incumbent will likely assuage the concerns of those investors hedging for an uncertain outcome.

For offshore investors, the key question will be whether this is a good opportunity to enter longs in Malaysian government bonds, equities, and FX. The removal of uncertainty related to the election should support flows, in our view, as investors respond to the positive economic outlook.

Now for those caveats. First, Malaysia’s central bank is unlikely to allow the ringgit to gain too much, too quickly. Barclays also worries about the opposition challenging the vote.

Already, opposition leader Anwar Ibrahim has called on his supporters to protest the election. The Wall Street Journal reports:

Malaysian opposition leader Anwar Ibrahim said he plans to lead mass protests against what he alleges were fraud-ridden national elections over the weekend that left the long-ruling National Front coalition in power.

“The movement for change is unstoppable,” Mr. Anwar said in a statement to drum up support for a Wednesday night rally that demonstrated he has no plans to quietly retire as one of Asia’s best-known dissidents.

“The simple demand of the people for a clean and fair election to ensure our elected government is accountable, transparent and incorruptible will continue to echo loudly in spite of the rigged 13th General Election,” he said on Monday.

Still, Malaysia stocks have been lagging other ASEAN markets because of the election overhang. Through May 3, the iShares MSCI Malaysia Index ETF had gained just 3.4%, while the iShares MSCI Philippines Investable Market Index(EPHE) had surged 25%, the iShares MSCI Thailand Capped Investable Market ETF (THD) had climbed 13% and the iShares MSCI Indonesia Investable Market Index ETF (EIDO) had jumped 15%.

For the time being, at least, Malaysia has some catching up to do.

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